January New Jobs Conundrum and Outlook for the Markets

By Victor Sperandeo with the Curmudgeon

The BLS reported on Friday that 353,000 (seasonally adjusted) jobs were added in January, which was much greater than the 185,000 new jobs forecast by market analysts. Job gains occurred in professional and business services, health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.

Also, the December and November new jobs numbers were revised up from 216,000 to +333,000 and from +173,000 to +182,000, respectively. With those revisions, the U.S. economy added an average of 255,000 jobs per month in 2023, higher than the BLS earlier stated monthly average of 225,000.

The labor force participation rate, at 62.5%, was unchanged in January, while the employment-population ratio at 60.2%, was little changed. These measures showed little or no change over the year.

BLS New Job Numbers are a Disconnect from Reality:

What no one mentions is that the total number of NON-SEASONALLY adjusted non-farm payroll jobs were actually DOWN by -2,635 thousand from 158,261 thousand in December 2023 to 155,626 thousand in January 2024. And that December non-seasonally adjusted jobs number was down 86 thousand from November’s 158,347 thousand. The actual job declines during this period always occur, as the workers hired for the year-end holidays are let go by retail employers.

DECEPTION NOTE: BLS does not reference non-seasonally adjusted jobs in its monthly Employment Situation reports but buries them in Table B1. Employees on nonfarm payrolls by industry sector and selected industry detail.

-->Please let us know if you have any idea of why they do that?

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Equally puzzling and more concerning is the huge number of business layoff announcements for January which will continue throughout 2024.

• U.S. employers announced 82,307 job cuts in January, up from 34,817 in December, a 136% increase, according to outplacement firm Challenger, Gray & Christmas.
• In a You Tube video, CPA Lisa Petrova states U.S. employers announced 83,307 job cuts in January (1,000 more than Challenger Gray reported), the most in 10 months and a sharp increase of 136% from 34,817 job cuts a month prior. The job cuts are due to increased input and material costs, as well as an expected decrease in consumer and business activity.
• Companies that announced layoffs are largely driven by the need to cut costs in an increasingly uncertain environment. Among the companies that announced layoffs were: PayPal – 9%, Twitch – 35%, Unity Software – 25%, Discord – 17%, Wayfair – 13%, Brex – 20%, Riot Games – 11%, Duolingo – 10%, Blackrock – 3%, Citi Group, eBay, Google, Amazon, Google, and many more companies.
• Google laid off hundreds of workers in its central engineering division and members of its hardware teams — including those working on its voice-activated assistant. In an email to some affected employees, April 9^th will be the last day of paid work for those unable to secure a new position within the company. The tech giant laid off thousands throughout 2023, beginning with a 6% reduction of its global workforce (about 12,000 employees) in January 2023.
• On January 30^th, UPS said it plans to lay off 12,000 employees to save $1 billion in costs. “2023 was a unique, and quite candidly, difficult and disappointing year,” said UPS CEO Carol Tomé during the company’s earnings call. “We experienced declines in volume, revenue and operating profits and all three of our business segments,” she added.
• Expect further layoffs in 2024: 38% of business leaders surveyed by ResumeBuilder think layoffs are likely at their companies this year, and around half say their companies will implement a hiring freeze. Amazon, BlackRock, Nike, Intel, and Citigroup are among the companies which have announced plans for job cuts this year.
• For a full list of layoffs expected in 2024, visit Business Insider.

Victor asks Curmudgeon readers why there is this serious lack of congruity in BLS jobs reports? Could it be an effort to portray a much stronger jobs market, which would cause the Fed to postpone any rate cuts BEFORE this November’s elections?

The cowbell of declining interest rates coupled with a huge amount of “cash on the sidelines” (3-month T-bills and $6 trillion in money market funds) could stimulate a “nuclear rally” in stocks, gold and other risk assets which government agencies evidently don’t want to occur at this time. Instead, Victor believes that the “powers that be” want a Fed rate cut in June to help the Democrats win the November elections.

It seems that U.S. government agency leaders want to prevent a Donald Trump presidential victory, because they believe they’d be fired soon after he takes office. Trump already accused Fed Chair Jerome Powell of being “political” and working to help President Joe Biden get reelected. “I think he’s going to do something to probably help the Democrats,” Trump told Fox Business Network, according to clips from an interview with Maria Bartiromo. “It looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected, I don’t know,” the former President added.

Market Review and Comments:

Megacap tech shares propelled the major stock indexes higher Friday. The S&P 500 rose 1.1% to reach an all-time high. The Dow Jones Industrial Average gained about 135 points, or 0.3%, closing at a record for the ninth time this year. The Nasdaq Composite added 1.7%. All three indexes notched a fourth consecutive week of gains.

Shares of Meta (formerly Facebook) surged 20% after the advertising tech behemoth reported its biggest quarterly sales increase in two years and initiated its first-ever dividend. That added $204.5 billion to Meta’s market value, the biggest one-day market-cap gain for any U.S. company in history!

Amazon’s stock rose 7.9% after the e-commerce and cloud computing giant reported revenue and profits that topped Wall Street’s expectations.

Here are Victor’s views on the markets:

• Large cap stocks, especially the Magnificent Seven, are headed higher with the rationale of no recession in 2024.
• Small cap stocks continue to lag. The Russell 2000 Index at 1,962.73 was down -0.6% on Friday and -2.5% year to date.
• Bonds continue flat to down as they are sold on strong economic news like Friday’s BLS job numbers.
• Gold is still in a holding upward pattern until lower rates take place, as it is correlated to the strong U.S. dollar.
• Commodities still weak due to China problems with their stock market hitting new lows.

Historical Analysis of Current U.S. Political System:

Alexander Frazier Tytler was born in 1747 (277 years ago) in Edinburgh Scotland. A judge, writer, and historian, Tytler was a Professor at the University of Edinburgh. He is often credited as predicting the fall of the U.S., suggesting that America will only last 200 years according to a model known as the “Tytler Cycle.” He understood the corrupt world we live in better than 98% of American leaders and U.S. citizens today.

In his lectures, Tytler expressed a critical view of democracy in general and representative democracies such as republics in particular. He believed that "a pure democracy is a chimera" and that "all government is essentially of the nature of a monarchy."

Tytler wrote that a democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.

Is that where the U.S. stands today? Do you believe (as we do) that the U.S. seems to be sliding into a fascist dystopia at an alarming rate?

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Wishing you success, good health, and good luck. Till next time…………

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional.  He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996.  He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies, and government policies.  Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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